TREC Texas Real Estate Exam Study Guide: July 2015

Saturday, July 25, 2015

What does an escalation clause in a lease agreement provide options for?

An escalation clause in a lease agreement provides the options for increased rentals periodically.

What does the act of 'Steering' means in real-estate?

A real estate agent would be considered steering if he/she guides customers toward (or away from) particular neighborhoods based on their race, ethnicity, religion, or nationality.

What does 'Easement in Gross' mean in real-estate?

Easement in Gross gives a particular right to an individual rather than to the property itself. Easement in Gross is often considered irrevocable for the life of the individual, but can be revoked if the individual sells that property that grants him / her that easement.

What does HOW stand for in real-estate?

HOW usually stands for Home Owners Warranty in real-estate.

Home Owners Warranty program usually covers new construction 10 year plan covering defects in material, faulty workmanship, and structural problems.

Written Contract versus Oral Contract in Texas Real-Estate

All real estate contracts must be in writing to be valid in Texas.

Oral Contract are not valid and not enforceable in Texas.

What is a "Seller's Disclosure" in Texas Real-Estate?

Seller's Disclosure is a document fill-out or provided by the seller to inform new / prospective buyer about the current known conditions of the property.

Must be given to buyer before he signs or makes an offer. If not given, the buyer has 7 days to terminate his offer.

Lead based paint disclosure rule in Texas Real Estate

This rule require the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.

What does a 'Stigmatized' property means in real-estate?

Stigmatized means the property where there has been a murder, alleged haunting, or in vicinity of residence of a known sex offender.

3 Basic approaches to Real Estate Appraisals

1. Market data or sales comparison

2. Income or capitalization method

3. Replacement cost or summation approach

Definition of 'Escheat' in real-estate

Escheat is the process of government taking over ownership of a real property because the previous owner who died did not have any heir or will to assign the real property to.

Definition of 'Estate at Will' in real-estate

Estate at Will simply means either party (tenant or owner) can terminate the lease at any moment without notice.

The opposite of Estate at Will is Periodic Tenancy.

Definition 'Periodic Tenancy' in real-estate

Periodic Tenancy is occupancy of a real property for a fixed period of time that auto renews.

A good example is a month-to-month lease. Unless specified, the lease continues to auto-renew, but the fixed period is only 1 month at a time.

The opposite of Periodic Tenancy is Estate at Will.

Definition of 'Joint Tenancy' in real-estate

Joint tenancy in real-estate means when the current owner dies the ownership of the real property will go to the other owners.

The opposite of Joint Tenancy is Tenancy in Common.

Meaning of 'Tenancy in common' in real-estate

Tenancy in common basically means there is more than one owner of the real property.

When any of the owner dies, the property will NOT go to the other owner(s). Instead it will go to the heirs of the owner who died.

In short, the real-estate property will be inherited by the heirs not to the other owner.

The opposite of 'Tenancy in Common' is 'Joint Tenancy'.

Definition of 'Reversion' in real estate

Reversion is the process of returning ownership to the original / previous owner at the end of Life Estate.

Since a Life Estate has an end of life (when the current Life Estate tenant dies), the owner of a Life Estate can either be the previous / original owner, in this case, Reversion or there can be a Remainderman assigned.

Definition of 'Remainderman' in real-estate

Remainderman is the person who will be the recipient of a Life Estate after the previous Life Estate owner dies.

Basically a Remainderman is the person who inherits the rights of a Life Estate.

Definition of 'Life Estate' in real-estate

Life estate is ownership of real property for the duration of someone's life. If the owner is the tenant, you may also call this Life Tenant.

After the current owner dies, the person who will receive a Life Estate is called the Remainderman.

Definition of 'Defeasible or Conditional Fee' in real-estate

As the word said it is Conditional, meaning it is ownership with conditions and/or terms. If the conditions are not met, it would cause the ownership to be terminated.

Definition of 'Lease-hold estate' in real-estate

Lease-hold estate is the right to own a real property for a pre-determined amount of time, in other words not forever and has a termination date.

The opposite of Lease-hold estate is Freehold estate.

Definition of 'Freehold Estate' in real-estate

Freehold estate is ownership of real property for an indeterminate length of time (forever).

This is the greatest bundle of rights.

Freehold estate is also known as Fee Simple or Fee Simple Absolute.

The opposite of freehold estate is Lease-Hold (Non-Freehold estate).

Definition of 'Adverse Possession' in real-estate

Adverse Possession is a term in real-estate to describe the process of acquiring ownership rights of a real property by using the property for a long period time.

For example, a property owner has been utilizing a empty land next to his property for planting a garden for more than 20 years, he may have the right to apply 'Adverse Possession' against that empty land to make it legally his real-property (depending on local laws).

Adverse Possession also known as Squatter's Rights.

The legal description of Adverse Possession is, the process of acquiring a real-property from the rightful owner though the State of Limitation.

Definition of 'Easement appurtenant' in real-estate

An Easement appurtenant is basically happens when an area of real-estate is being used by another owner to access their property.

or explained in another word,

Owner A was allowed to used part of Owner B's property to have a driveway to access his property.

Definition of 'easement' in real-estate

In real-estate an easement is a section of land that does not belong to the land owner, but usually exists within the boundaries of land area and the owner has been given limited rights to use.

A good example of easement are utility easements, million of homes have utility easements (part of land usually at the end of the backyard where utility companies have cables, pipes, sewers, etc.. underground). While the homeowners have been given to right to enjoy the land above this easement area, they are not allowed to dig and tamper with the cables, pipes, etc... underground.

Definition of 'encroachment' in real-estate

Encroachment means a structure (improvement on land) is overlapping against another adjacent property or properties.

Definition of 'writ of execution' in real-estate

Writ of execution is basically the execution process of the judgement. The execution is the next step after somebody has won a judgement and was unable to receive compensation so therefore 'Writ of Execution' would be allowed by the court to enforce it.

Enforcement of writ of execution can be for taking over a property possession (seizure), etc...

Definition of 'General lien' in real-estate

General lien is against the borrower instead to a particular property and it applies to all properties belonging to the borrower, hence the name 'General' lien.

A good example of a general lien is an IRS / income tax lien, the IRS would usually file a general tax lien against a person or organization instead to any particular personal property.

Definition of 'Specific lien' in real-estate

Specific lien simply means a lien on a specific property. For example a mortgage lien against a real-estate property.

Definition of 'Involuntary Lien' in real-estate

An involuntary lien is a lien against a title which was NOT placed by the owner.

Usually involuntary lien are caused by penalties from breaching a certain local, state, or federal law.

A good example would be an unpaid Ad Valorem tax lien (VAT tax on real property) or unpaid Property tax.

Definition of 'Voluntary Lien' in real-estate

A voluntary lien is a lien which the borrower has started voluntarily.

For example a person buying a home on mortgage would caused a voluntary lien because as soon as the owner own the new home, he/she will also be placing a lien (for the mortgage / lender) on the title of the home.

What is a proper real-estate definition of 'Encumbrance'?

An encumbrance usually apply to limitation of right(s) against a title.
It is often referred to 'Cloud on a Title'.

What is the proper real-estate definition of 'Lot or Parcel'?

A 'Lot or Parcel' is used to describe the one or more real-estate properties.

For example, several pieces of land may be sold together in a Lot or Parcel.

What is the proper real-estate definition of 'Plot'?

a Plot is a map or layout of IMPROVEMENTS on a real property.
The key point here is the word 'improvements', instead of the land.

What is the proper real-estate definition of 'Plat'?

a Plat is a map of an area. For example a plat of a town, section or subdivision.

What is the proper real-estate definition of a 'Section'?

a Section in real-estate is equivalent to 640 Acres or 1 Square Mile.

How many sections are in a township?

There are 36 sections in a township

Real-estate definition of Rectangular / Government Survey

This is method of defining rectangular sections of real-estate using 'Section', 'Township' and 'Ranges'.

For example:

S2T3R4 to S4T8R9

Which means

Section 2, Township 3, Range 4 to Section 4, Township 8, Range 9

What is the proper real-estate definition of 'Monuments'?

In real-estate (land), Monuments are markers to identify points.
For example, a surveyor may use a tree as a monument to identify a starting point of a piece of land.
Several monuments can be used in 'Metes and Bounds' to describe the starting and end points of the land.

What are real-estate definition of 'Lot, Block and Subdivision'?

What are real-estate definition of 'Lot, Block and Subdivision'?

Lot, Block and Subdivision are mostly used to describe a residential real-estate property.
Usually used in residential listing agreements, closing contracts and real-estate title.

Counties also usually use 'Lot, Block and Subdivision' to describe a taxable Real Property.

What are the proper definition of real-estate 'Metes and Bounds'?

Metes and bounds are used to legally describe Land in real-estate which has a point of beginning and end point.

Metes and bounds is the oldest method used since the original 13 colonies.

Land 4 economic characteristics in real-estate

Land 4 economic characteristics (Real-Estate definition)

Scarcity (supply and demand)
Modification (improvements on the land like building)
Fixity (permanent)
Situs (location)

What are the proper real-estate definition or characteristics of 'Land'?

Land's 3 physical characteristics in Real-Estate are

1. Non-homogeneity (no land is exactly same)
2. Immobility (not movable)
3. Indestructibility (can not destroy land)

What is the proper real-estate definition of 'Accession'?

Accession is the process of acquiring a 'Fixture' by removal of it before the termination of a lease.

What is the proper real-estate definition of 'Trade Fixtures'?

Trade fixtures are commercial/business related fixtures used to operate a business.

Since it is considered a 'Fixture' they are usually attached to the 'Real Property' and considered as part of the real-estate value.

A good example of a Trade Fixture is cooking equipment for a restaurant like its Range Hood vents.

What is the proper real-estate definition of 'Severed' or 'Severance'?

Severed or Severance is the separation process of 'Personal Property' from a real-estate property. In other words making something that used to be treated as 'Real Property' back to 'Personal Property'.

Severance is the opposite of 'Annexation'

What is the proper real-estate definition of 'Annexation'?

Annexation is the process of turning 'Personal Property' attached to real-estate property to turn it into 'Real Property'.

The opposite of 'Annexation' is 'Severed / Severance' (process of separation).

What is the proper real-estate definition of 'Fixture'?

A fixture is a 'Personal Property' which has been permanently attached in such a way that make it included into a 'Real Property', this process is called 'Annexation'. And the opposite of 'Annexation' is 'Severance'.

What is the proper definition of 'Personal Property'?

Right and/or interest in things of a temporary or movable nature (chattel personalty). Ownership of things in which can be transferred using bill of sale.

What is the proper definition of 'Real Property'?

Land, Improvements attached to the land, and the rights to use them

What is the penalty limit paid per TREC licensee?

$50,000 per transaction

and

$100,000 per license

If TREC suspended license and paid out of trust, can you still hold a license?

NO, your license will be suspended until all has been paid back with interest

What happens when balance in Real-Estate Trust gets too high?

When trust balance goes above $3.5 Million, overflow will be transferred to State of Texas General fund.

What does TREC invest Trust money in?

What does TREC invest Real-Estate Trust money in?

Treasury bills, notes, etc... kind of similar to Employees Retirement system in Texas

What is our fee when trust account is low?

$10 renewal fee

When do we have to pay a fee for Trust account?

When the trust account balance is between $1 to $1.7 million.

How much can public be paid for damages?

Up to 3 times their lost of monies

Who created Real Estate Recovery Trust Account?

TREC (Texas Real-Estate Commission)

What is adminstrative penalty consist of?

$5000.00 / day and 30 days to pay it off

Punishment for acting working without a license?

(any / all of below may apply)

Class A misdemeanor

Fine up to $4K

1 year in country jail

if profited, 3 X of civil for that amount

Lawsuits relating to the Civil Rights Act of 1866 should be taken up to?

Directly to Federal Courts

Explanation:

Since Civil Rights Act 1866 is a Federal Law, lawsuit involving federal laws must be taken directly to federal courts.

Who services the loans that they originate?

Mortgage Bankers

Explanation:
Mortgage bankers originate the loan and also service the loan (collects payments and escrows).
Not to be confused by Mortgage Brokers who are only involved during the sales of the mortgage.

In Texas what are all the legal commission schedules?

All of the following commission schedules are legal:

Percentage of Sales Price (most common)
Hourly Rate
Fee for Services

When someone bought an "apartment" and start receiving his own property tax bill, this proofs that

He/she just bought a Condominium

Explanation: Condominium units are sold separately and each owner are responsible for their own property tax bill.

Under a percentage lease, which of the following apply

This usually apply only for commercial leases, because it is usually based on percentage of some kind of income.

Therefore all of the following applies:

Rent adjust according to business income

There is a fixed minimum rent

Proper location provides the best chance for higher volume

3 lawyers appointed by President of Texas BAR association

1 general public member appointed by Texas Governor

How many people make up TREC?

TREC is made up of:

9 community members,3 general public members,and 6 brokers

What is TREC's responsibility?

TREC's responsibility is to administer provisions of Texas's real-estate license act.

When was TREC created?

TREC was created in 1949